Update mechanism to curb tax evasion in entertainment sector: Parliamentary panel to I-T department

A Parliamentary panel has asked the income tax department to continuously update its mechanism to curb tax evasion in the fast-growing entertainment sector.

The sector in the recent past has expanded into new segments like OTT, podcasts, audiobooks and gaming apart from the traditional modes such as television, radio, cinema, music and sports.

The Public Accounts Committee (PAC) opined that increasing affluence and changing lifestyles have contributed to making the Indian entertainment industry a sunrise sector for the economy, with a high potential for increased revenue generation.

The 51st report of the committee on 'Assessment of Assessees in Entertainment Sector' was tabled in Parliament on July 21, 2022.

It noted that the dynamic nature of the industry poses a challenge of maintaining a balance in the growth of new sectors viz-a-viz ensuring that tax revenue is correspondingly enhanced with the rise in avenues of income.

"Considering these aspects, the committee recommended that to curb tax evasion, a mechanism be brought in place for continuous review of the possible sources of revenue being generated in the sector and update the systems so as to keep pace with the contemporary developments taking place in the entertainment sector," the report said.

While appreciating the initiatives taken by the finance ministry, the PAC emphasised the need for fine-tuning the e-systems coupled with efforts to rationalisation business codes used for Income Tax Return (ITR) forms, refinement of information sharing mechanism and strengthen the monitoring mechanism.

The panel, chaired by senior Congress leader Adhir Ranjan Chowdhury, suggested the endeavour should also be made to liaise with district administrations and other government agencies concerned with economic offences for enabling seamless exchange of data with the income tax department.

"This, the committee have felt, will further improve the database on assessees/ offenders and will help in cross verification of figures disclosed by them during the assessment process," the report said.

The panel also said the Central Board of Direct Taxes (CBDT) should keep a constant watch over the rising number of high-risk assesses' cases in new and emerging segments of the entertainment sector -- augmented and virtual reality, social videos, cloud gaming, and podcasting.

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